SC now says naming loan defaulters not a solution

In a U-turn, the Supreme Court on Friday said the disclosure of names of borrowers who have defaulted on bank loans worth a whopping R85,000 crore “will not lead anywhere, but finding a root cause of accumulation of non-performing assets (NPAs) and solutions” is what is required for banking reforms.

It said the panel report can’t prevent it from directing further investigations. (Reuters)

In a U-turn, the Supreme Court on Friday said the disclosure of names of borrowers who have defaulted on bank loans worth a whopping R85,000 crore “will not lead anywhere, but finding a root cause of accumulation of non-performing assets (NPAs) and solutions” is what is required for banking reforms.

“The disclosure of names with over R500-crore bad loans will not lead anywhere. Root of the malice is accumulation of NPAs. The real cause is to address the root cause of NPAs and how to solve it,” a bench headed by Chief Justice TS Thakur said.

It asked the a five-member high-level panel constituted by the Centre, which comprises RBI executive director and other top brass of public sector banks, to give final recommendations on banking reforms, including the steps being taken to recover huge NPAs of the nationalised banks, within three weeks.

However, it said the recommendations will be subject to the scrutiny of the court as the Centre for Public Interest Litigation (CPIL), an NGO and the petitioner in the case, expressed reservations over the independence of its members. The court noted CPIL counsel Kamini Jaiswal’s concern that the high-powered committee does not inspire confidence as it is manned by people who are themselves heading different banking institutions with huge NPAs.

The apex court also said the panel report can’t prevent it from directing further investigations.

Stressing the need to find “some solution” and reason as to why bad loans are accumulating, the bench also asked the Centre to file a “comprehensive note indicating the government’s action plan in a sealed cover” within four weeks detailing steps taken to overhaul the debt recovery system and laws dealing with quasi-judicial bodies like the Debt Recovery Tribunal (DRT) and the Debt Recovery Appellate Tribunal (DRAT).

After perusing a report submitted by the RBI in a sealed cover, the CJI on October 28 had asked the central bank as to why the names of 57 borrowers who had defaulted on bank loans worth a whopping R85,000 crore should not be made public.

“Who are these people who have borrowed money and are not paying back? Why this fact that the person has borrowed money and not paying back be not known to public? And if the bar is lowered below R500 crore and above R100 crore, then the default amount would cross over R1 lakh crore,” it said.